The Medicare program may not get the same amount of attention as Social Security, but it's undeniable that its importance is growing for our nation's elderly population.
Today, there are approximately 56 million people enrolled in either Medicare or Medicare Advantage plans, and this figure is only expected to grow. The U.S. Census Bureau is forecasting that the elderly (those aged 65-plus) population will essentially double between 2012 and 2050 to 83.7 million. Long story short, the medical needs of a larger elderly population that's living longer than ever will be immense.
But the only way consumers can take full advantage of the care they can get through Medicare (or Medicare Advantage) is to understand their options. This starts with knowing the most important dates tied to Medicare.
Seven important Medicare dates you need to know
Regardless of whether you're already enrolled in Medicare, expect to enroll this year, or are nearing age 65 (the age of eligibility for Medicare) these are the seven dates you'll want to know.
Original Medicare is set up in such a way that Part A (hospital insurance) and Part B (outpatient services) are presented as a one-size-fits-all package. There's no shopping around with individual insurance companies for a better deal with parts A and B.
However, Part D, or prescription drug, plans are contracted through private insurers. This means you have an opportunity to shop around for the best value for your medical needs. Keep in mind that the cheapest plan may not always be the best fit for you. Each year, Oct. 1 is when insurers begin publishing the premium prices and coverage details of their Medicare Part D plans every year. Thus, Oct. 1 marks the beginning of an "open season" of sorts for Medicare Part D research.
Oct. 15 to Dec. 7 (Medicare's open enrollment period)
Every year on Oct. 15, people eligible for Medicare are able to begin enrolling in Part D plans of their choosing. The enrollment period for Part D continues for nearly two months, through Dec. 7. It should be noted that if you were already enrolled in a Part D plan in the current year, you'll be automatically renewed in that plan if you choose to do nothing. However, it's in your best interests to shop around, because Part D coverage and pricing can substantially change from one year to the next.
This is also the time period when people enrolled in an original Medicare plan can switch to Medicare Advantage plans, and vice versa. Additionally, this is the time period to consider changing from one Medicare Advantage plan to another.
To complete the circle, Jan. 1 is when the Part D plan you selected during the time frame above becomes effective for the current year. If you fail to select a Part D plan, you'll have to wait until the next enrollment period to join. Furthermore, there's a penalty attached with not purchasing Part D, which works out to 1% of the national base beneficiary premium ($34.10 in 2016) multiplied by the number of full uncovered months you didn't have Part D coverage. The national base beneficiary premium generally increases annually with the rate of inflation. This penalty will follow you around for as long as you have a Medicare plan (i.e., the rest of your life).
Jan. 1 to Feb. 14
This is a special enrollment period that allows Medicare Advantage enrollees the opportunity to drop their Medicare Advantage plan and enroll in original Medicare without a penalty. Part D drug plans will be available for you to choose from, but it's possible that Medigap policies, which help cover some of the roughly 20% of medical costs Medicare makes its beneficiaries responsible for, may not be available during this time frame.
Note that people in original Medicare are not allowed to do the opposite and enroll in Medicare Advantage between Jan. 1 and Feb. 14. This enrollment period is a one-way street.
Seven-month IEP tied to your birthday
For those of you who are new to Medicare, your initial enrollment period, or IEP, revolves around your 65th birthday. The IEP window is seven months long and includes the three months prior to the month of your 65th birthday, the month in which you'll turn 65, and the three months following.
Your effective coverage dates can vary based on the portion of the seven-month window in which you choose to enroll. Further, if you've filed to receive Social Security benefits prior to age 65, you'll be automatically enrolled in parts A and B at age 65.
Jan. 1 to March 31
However, if your IEP passes and you fail to enroll in Medicare, or you weren't automatically enrolled, you can apply for Medicare Part A and Part B during the general enrollment period between Jan. 1 and Mar. 31 each year. Enrollees who sign up during the general enrollment period have their coverage begin on July 1.
Keep in mind, though, that enrolling during the general enrollment period means you could face late-enrollment penalties. Part A is free for most people (as long as you have 40 lifetime work credits), but those who don't have enough lifetime work credits could face a 10% monthly premium penalty. Similarly, Part B premiums could rise 10% for each 12-month period you weren't enrolled but were eligible to enroll. The Part B penalty mirrors the "punishment" that comes with failing to enroll in Part D -- you'll pay this penalty for as long you're enrolled in Medicare.
The year 2028
Finally, it's important for Medicare beneficiaries, as well as workers who have yet to qualify for Medicare benefits, to keep the year 2028 in mind.
According to the 2016 Social Security and Medicare Board of Trustees' annual report, the Hospital Insurance Trust is expected to exhaust its excess cash reserves by 2028. This is actually two years earlier than the Board had expected in its 2015 report. Changing demographics and costlier treatments are pressuring Medicare, and if the HI Trust's cash reserves run out, it would become budget-neutral. In other words, disbursements would be equal to the amount of payroll tax revenue brought in. The Board estimates this would reduce disbursement payouts by 13% from current levels, and it could cause some hospitals and physicians to stop accepting Medicare.
In short, it's important that Americans factor in the possibility that a greater percentage of medical costs could be thrust upon them in the years ahead and plan accordingly to save more in order to prepare for this possibility.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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